Trade Desk Thoughts - Chicago PMI

Chicago PMI (August) Actual 57.9, Expected 50.1, Previous 50.8

Release Explanation: The activity level of Purchase Managers, they are surveyed on production, employment, inventories, orders, delivery data. The PMI is split into reads on Manufacturing, Service, and Construction industries. A read over 50 denotes growth. This data gives an early indication to the Markets of the current situation ‘on the Factory floor’, it really does give a good idea of sentiment in the Business side of the economy. Trends building in PMI usually go on to affect GDP and CPI…eventually. As an indicator of economic performance the PMI has the ability to easily affect currency valuations as Institutions re-align existing positions, or build new, on the strength of these reports.

Trade Desk Thoughts: "The employment component is the most worrisome number here," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The three month average (6) indicates that hiring is the weakest since October 2002. And although the index is considered to be a lagging indicator, the overall survey points to little or no real growth. The report is consistent with the income and spending numbers seen earlier in that the data points to a slowing in the economy in the second half of the year, which will tend to worsen as growth decelerations occur in the U.K., Euro area, Japan and other parts of Asia."

Forex Technical Reaction: The dollar jumped immediatly after the release, with strong gains against the euro, pound and yen.

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